Hiring struggles cost UK employers £2.2bn annually

Skills gaps are costing UK employers billions of pounds in extra recruitment costs and inflated salaries, reports The Open University’s latest Business Baramoter.

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The Business Barometer, which monitors the skills landscape of the UK, reports 90% of employers found it difficult to recruit workers with the required skills in the last 12 months.Managerial roles are proving particularly difficult to fill. One in five of the 300 SMEs and 100 larger businesses studied say they struggle to hire senior managers (21%) and mid-level managers (19%). Over two in five (43%) also find candidates lack management skills.At the same time, around half (47%) of employers say that they are struggling to attract talent with the right IT skills, despite the crucial role digital skills play in the UK economy.

Recruitment delays see costs mount

The recruitment process is therefore taking longer for three-quarters (75%) of employers – an average of one month and 24 days more than expected.The upshot is employers are facing significant additional costs in hiring people, estimated to be at least £1.7 billion, once recruitment fees and temporary staff fees are taken into account.The study suggests this trend is set for the next 12 months. Seven in ten (69%) report they will struggle to find workers with the right skills over the next year.

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Solutions to the skills challenge

These findings come at a time when the UK has the lowest unemployment rate since 2005. People in work are also reluctant to move jobs due to continued Brexit uncertainty.At the same time, the lack of clarity about future immigration rules is putting off some EU nationals from taking up roles in the UK.To overcome the hiring challenge, some companies have inflated salaries to above market rates to attract talent. The Open University estimates this costs employers a further £527 million.In the last 12 months, more than half (56%) of businesses increased the salary on offer to well above market rate to get the skills they required. The study found that average increase amounted to £4,150 per hire for SMEs and £5,575 per hire for larger organisations.Over half of employers (53%) unable to find a candidate with the required skill set chose to hire at a lower level instead.The same proportion of employers are using training to boost these new employees’ skills and bring them up to the level required for the role.

Apprenticeships part of employers’ response

Over the next year, employers are planning to change the type of training they offer to their staff, reports The Open University.The largest, public distance-learning and research university expects the number of organisations in England offering apprenticeships to nearly double from 31% to 59%. It believes this is most likely as a result of the new apprenticeship levy.Just over half (52%) of employers in England expect the levy to reduce the skills gap in the next year, with three in five (62%) viewing it as an opportunity for their organisation.

Workforce development high on skills agenda

Steve Hill, external engagement director at The Open University, said: “The UK challenge of finding talent with the right skills means that businesses need to look at recruitment, development and retention differently."Now faced with a shrinking talent pool, exacerbated by the uncertainties of Brexit, it is more important that employers invest in developing their workforce.''Organisations need an agile workforce that can embrace change and meet new challenges.“The cost of the skills gap to the UK economy shows it must become a business and government priority to build the skills and capabilities of each individual through investing in talent at all levels.“The Open University has a number of offerings, such as degree apprenticeships, which help to future-proof UK businesses and enable lifelong learning, as well as enabling greater social mobility by increasing opportunities.”The full findings of the report will be presented to MPs and Peers at an event in the Houses of Parliament on 11 July.

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